What is Nifty 50 and How is it Calculated
Sensex" floating around. You probably wondered why people are so personally invested when there’s news of a fall in Nifty levels. But here’s the thing: some people are literally invested.
Nifty 50, or Nifty, is the flagship index of the National Stock Exchange (NSE) and consists of the top 50 companies listed on the exchange based on their market cap. Also known as large-cap or blue-chip stocks, companies included on the index belong to diverse sectors like auto, metals, pharma, media, IT, FMCG, telco, and energy. Investors often use the Nifty index as a barometer to gauge the overall performance of the stock market, as it consists of some of the most well-known and highly liquid companies on the exchange.
The companies that form the Nifty 50 index today aren’t randomly picked. The index is reconstituted every six months – sometimes resulting in the removal of existing companies and the addition of new ones to the coveted top 50 list. Here’s the eligibility criteria if you’re curious: The Nifty 50 today uses the float-adjusted and market capitalisation-weighted method.
The level indicated by the index is nothing but the overall market value of all the stocks it contains over a fixed duration. To understand what this means, let’s get you to understand what we mean by terms like float-adjusted and market capitalisation. Market Capitalisation in itself refers to the aggregate value of the shares held by the company and all its investors.
But free-float Market Capitalisation excludes the shares held by investors like the government, trusts, and other private parties like promoters. Now let’s get to the calculations. The formula to arrive at the Index Value is simple.
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